European Lactic Acid Prices Drop in December Amidst Reduced Demand

In December 2023, the European market witnessed a decline in Lactic Acid prices, attributed to several factors. This downward trend was influenced by a decrease in demand from end-users, a fall in feedstock prices, and an oversupply of Lactic Acid in the market. Lactic Acid, known for its versatility, is utilized in various industries, acting as an acidulant in the food and beverage sector to regulate acidity in products like dairy and fermented foods. The recent reduction in demand from these sectors has contributed to the decrease in Lactic Acid prices.

A key factor contributing to this trend is the decrease in prices of essential raw materials, particularly corn starch and corn. In December, the market volume of corn in the production area experienced a continuous increase, and downstream trading entities adopted a cautious approach, observing market conditions. Furthermore, the influx of competitively priced imported corn and its substitutes emphasized a scenario of robust supply and weak demand pressure in the domestic corn market. This dynamic exerted comprehensive downward pressure on corn prices, consequently contributing to the decline in Lactic Acid prices.

The Chinese market experienced a significant decrease in Lactic Acid prices during December, driven by a decline in new order inquiries both domestically and internationally. The reduced domestic demand is closely associated with deflationary pressures in China, prompting consumers to postpone purchases in anticipation of further price drops. This hesitation in buying had a cascading effect on overall consumption, contributing to an oversupply of Lactic Acid in the Chinese market. Furthermore, the demand for goods manufactured in China experienced a decline in major overseas markets like Europe, influenced by sustained high-interest rates, contributing to the decrease in Lactic Acid prices in the Netherlands.

The downturn in eurozone business activity unexpectedly deepened in December, signalling a likely recession in the bloc's economy. Both companies and consumers are scaling back on investments and spending due to elevated interest rates and persistent high inflation, contributing to an overall reduction in the demand for Lactic Acid. European inflation surged to 2.9% in December, reversing a six-month trend of consecutive falls and raising uncertainties about potential interest rate cuts by the European Central Bank. The annual rise in consumer prices in the 20 Eurozone countries, reaching 2.9% from the previous month's more than two-year low of 2.4%, has strained overall consumers’ demand in the Eurozone, thus explaining the decline in Lactic Acid prices in the Netherlands.

According to ChemAnalyst analysis, Lactic Acid prices have continued to decline at the start of FY24, primarily attributed to sustained weakened demand from the food, cosmetic, and pharmaceutical industries. Market participants are expected to prioritize destocking existing inventories at lower quotations, contributing to an overall bearish sentiment for Lactic Acid in the European market.